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Mobe networks bag UK 4G for a steal - £1bn shy of Osborne's £3.5bn

BT, EE, Three, O2, Vodafone win spectrum licence auction, raise 10% of 3G's £23bn

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The rights to use Blighty's 4G frequencies were today sold to UK operators, plus a BT subsidiary without national aspirations, raising a mere £2.3bn for the Treasury.

That's somewhat short of Chancellor George Osborne's expectations of £3.5bn. EE (which also operates the Orange and T-Mobile brands in Britain), Three, O2 and Vodafone all effectively bought licences to run next-gen mobile broadband services in the UK - the latter paying the most - putting the country on the path to a full-blown 4G rollout.

The auction has been rumbling on, in silence, for about a month, but this morning Ofcom announced who had paid for what and how much. The purchased radio bands will let all four national operators roll out national 4G coverage, but we won't see any new entrants shaking up the market.

What's the frequency, Kenneth?

EE, formerly known as Everything Everywhere, is already the UK's largest operator, is busy running 4G services early, and now holds considerably more spectrum than anyone else: it bought loads - 10MHz of prime spectrum in the old TV bands at 800MHz, and 70MHz at 2.6GHz to complement its existing holdings.

Three got its reserved 800MHz allocation (10MHz in size), which was one of those cordoned off the ensure the UK maintained four network operators, and declared itself happy with that given the lump at 1.8GHz it recently bought off EE.

Telefonica, which runs the O2 brand in Britain, was quite reserved, buying 20MHz in the prime 800MHz band, but nothing else, while Vodafone (which hitherto had broadly similar holdings to Telefonica) splurged on the same quantity at 800MHz along with 40MHz at 2.6GHz and 25MHz of the unpaired band at 2.6GHz too.

That unpaired spectrum was the most interesting. It can only be used with TDD (Time Division Duplex) phones with which UK network operators are unfamiliar - so there was the possibility they'd ignore the slot and let a new player in, but it wasn’t to be and Vodafone and BT will split it between them.

BT also took a significant chunk at 2.6GHz, but has been quick to quash any rumours of national aspirations, explicitly stating that it won't be building a national cellular network so some sort of femtocell and roaming deal would seem most probable.

All that lack of excitement led to relaxed bidding, with the total raised only hitting £2.43bn, a billion pounds less than was expected (and budgeted for in the last Autumn Statement) and half what the Treasury was really hoping for.

No one imagined the 4G auction would reach the heady heights of the last one, the 3G sell-off in 1999 when operators fell over themselves to spend more than £22bn on half the quantity of spectrum - radio waves aren't worth what they once were - but five billion quid would have suited the Exchequer well.

The breakdown of auction bids is as follows, according to Ofcom:

Mobile operator Radio frequencies nabbed Wonga paid
EE 2 x 5MHz of 800MHz and
2 x 35MHz of 2.6GHz
£588,876,000
Hutchison 3G UK Ltd (Three) 2 x 5MHz of 800MHz £225,000,000
Niche Spectrum Ventures
(a subsidiary of BT)
2 x 15MHz of 2.6GHz and
1 x 20MHz of 2.6GHz (unpaired)
£186,476,000
Telefónica UK Ltd 2 x 10MHz of 800MHz
(coverage obligation lot)
£550,000,000
Vodafone Ltd 2 x 10MHz of 800MHz,
2 x 20MHz of 2.6GHz and
1 x 25MHz of 2.6GHz (unpaired)
£790,761,000
Total £2,341,113,000

Not that it's about money, as Ofcom always likes to remind us: the auction process is used on the premise that he who pays the most has the most incentive to use the bands effectively. So, we're told, the quantity of money is irrelevant and may in fact benefit consumers as the operators will want to spend more cash on infrastructure, assuming they've not blown it all on 4G licences. ®

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